Last June SAS said it planned to sell its stakes in Spanair, BMI and Air Greenland as part of a major restructuring strategy covering the period to 2011.

Iberia had expressed formal interest in acquiring Star Alliance member Spanair but withdrew last month, and SAS Group warned that it would abandon the divestment process if it could not finalise a sale by the end of this month.

It blames challenging market conditions in the Spanish aviation market, record oil prices and pressure in the financial sector for the development.

SAS chief executive Mats Jansson says: “The value we could realise does not reflect the underlying value in Spanair. Spanair is a company with a competitive cost position and is the second-largest carrier in the large Spanish market.

“We have done a very thorough evaluation and have concluded that we will abandon the current sales process and continue as a shareholder committed to ensure a profitable Spanair.”